Correlation Between Lixiang Education and Kuke Music

Can any of the company-specific risk be diversified away by investing in both Lixiang Education and Kuke Music at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Lixiang Education and Kuke Music into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lixiang Education Holding and Kuke Music Holding, you can compare the effects of market volatilities on Lixiang Education and Kuke Music and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Lixiang Education with a short position of Kuke Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lixiang Education and Kuke Music.

Diversification Opportunities for Lixiang Education and Kuke Music

-0.62

Correlation Coefficient

Lixiang Education  Kuke Music

Excellent diversification

The 3 months correlation between Lixiang and Kuke is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Lixiang Education Holding and Kuke Music Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kuke Music Holding and Lixiang Education is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Lixiang Education Holding are associated (or correlated) with Kuke Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kuke Music Holding has no effect on the direction of Lixiang Education i.e., Lixiang Education and Kuke Music go up and down completely randomly.

Pair Corralation between Lixiang Education and Kuke Music

Given the investment horizon of 90 days Lixiang Education Holding is expected to generate 1.07 times more return on investment than Kuke Music. However, Lixiang Education is 1.07 times more volatile than Kuke Music Holding. It trades about 0.18 of its potential returns per unit of risk. Kuke Music Holding is currently generating about 0.04 per unit of risk. If you would invest  472.00  in Lixiang Education Holding on December 28, 2024 and sell it today you would earn a total of  861.00  from holding Lixiang Education Holding or generate 182.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Lixiang Education Holding  vs.  Kuke Music Holding

Lixiang Education Holding

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lixiang Education Holding are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical and fundamental indicators, Lixiang Education demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Kuke Music Holding

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kuke Music Holding are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting forward-looking signals, Kuke Music exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lixiang Education and Kuke Music

The main advantage of trading using opposite Lixiang Education and Kuke Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lixiang Education position performs unexpectedly, Kuke Music can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Kuke Music will offset losses from the drop in Kuke Music's long position.

The idea behind Lixiang Education Holding and Kuke Music Holding pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.